Sunday, June 3, 2012

May 2012 Stock Market Update

Dow Index Monthly Closes Through May, 2012

Ugly

A month ago, I reported that we had just completed a month that, for all intents and purposes, ended right where it started. Not the case this month. This month was -- ugly. It started with a new 52-week high on May 1, and then went south. The first half of the month was characterized by continuing concerns about Europe. By the end of the month, the concerns were much closer to home given increasing evidence that the recovery may be stalling.

The result was a month awash in red. For the whole month of May, there were only five days when the market finished in the black. Predictably, there was another rush to treasuries. So much so that by the end of the month the 10-year note had established a new all-time low; yields closed the month at only 1.59% (and yields continued lower still on June 1.).

The DJIA (Dow Jones Industrial Average) closed the month at 12,393.45, a loss of 820 points for the month. As you can see from the chart above (click to expand), that put us underwater for the last 12 months, and nearly so for the calendar year.

Where are we Now? May, Quarter-to-date, Year-to-date & Recovery-To-Date Review

Here's where we stand vs. some key dates and milestones:

From All-Time High of 14,165 on Oct 9, 2007: the Dow is down 1771 points (12.5%)

From Crash Low of 6547 on March 9, 2009: Up 5846 points (89.3%)

From one year ago close of 12,570 in May, 2011: the Dow is down 176 points (1.4%)

From the new 52-Week High of 13,279 on May 1, 2012: down 886 points (6.7%)

From the 52-Week Low of 10,655 on October 3, 2011: Up 1738 points (16.3%)

Year-to-Date From 2011 close of 12,218: The Dow is up 176 points (1.4%)

Quarter-to-Date From March, 2012 close of 13,212: The Dow is down 819 points (6.2%)

The Next 10 Years

My stock market projection model continues to project below average 10-year returns. The "official" 2012 10-year projection as of January was for 5.6%/year. Above average market increases early in the year reduced prospective returns even more. This month's dive has increased prospective returns back to around 5.6%/year.